How Kimberly-Clark Keeps Costco in Diapers

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Outline

1. Background

2. How to success with Vendor Managed Inventory(VMI) & Advantages

3. Results & Additional Facts

Background

FMCG(Fast Moving Consumer Goods) World Has Been Changed

Retailers consolidation & globalization

Increasing power of retailers

Shifting balance of power from suppliers to retailers

Increasing pressure on profits

More need of effort to keep retailers as the customers for suppliers

An Overview of Kimberly-Clark Company

- A giant FMCG Company headquarted in Dallas, Texas

- 56,000 employees in 35 countries worldwide

- 2009 Annual Sales of $19,1 billion

- Kimberly-Clark’s Global Brands are sold in more than 150 countries

- Well-known family care and personal care products

- No. 1 or No. 2 share position globally in more than 80 countries

Kimberly-Clark Brands

- A Retail Company headquarted in Issaquah, Washington

- The largest warehouse club

- 68,000 US Workers

- $61 Billion Company with 500 stores most of which located in the US

An Overview of Costco

Diapers Category- “Pull “ product

Shoppers go specifically to buy If couldn’t find go another store!

- Pressure to keep in inventory for retailers

- Price-concious customer wants as cheap as possible

- Consumer Confidence: Must always be on the shelf in order to keep loyal

- No stock-out or excess inventory

Why Costco is important for Kimberly-Clark Costco is a giant customer for Kimberly Clark

Only national diapers brand in Costco stores

Harsh Competition among suppliers Need to keep Costco

Need a Value Addition Focus: Cost Reduction + Spot & fix Inefficiencies (Avoid Stock-out)

Business models are changing…

How to Success with Vendor Managed Inventory (VMI) & Advantages

Coscto & Kimberly-Clark Partnership

Business models are changing Strategic Alliances become

more popular & powerful Multi-faced Goal-oriented Long-term Commitment of many sources

Types of Strategic Alliances Quick Response Strategy Continuous Replenishment Strategy Vendor Managed Inventory System

Coscto & Kimberly-Clark Partnership (Vendor Managed Inventory)

- Vendor Managed Inventory (VMI)

- Inventory policy responsibility to the supplier

- Advance information sharing with high level of technology

- Became famous with the partnership between P&G and Wal-Mart 1985- Wal-Mart sales increased at 20-25% - Inventory turnover improved 30%.

Coscto & Kimberly-Clark Partnership (Vendor Managed Inventory)

- Assumption: Suppliers have better position to find and solve the inefficiencies in the supply chain

- Responsibility on Kimberly-Clark thru diapers inventory on shelves- Works on past data, analysis on stock levels- Very detailed sales information sharing- Forecasts & shipped- Improved technology - computer link

Advantages Focus on Core Strengths

Core Strength = Competitive Advantage

Managing the supply chain for diapers is not Costco’s core strength – UNNECESSARY

Reduced staff in supply chain inventory holding cost

Cost Reduction

Advantages Technology Flexibility

Better alliance requires advanced technology

Technology changes everyday Expensive Need of continuous investment

Leave it to Kimberly-Clark

Cost Reduction

Advantages Less levels of out-of-stock

Out-of-stock = Not available on the shelf Loss on potential sales

Costco: Category management is based on 2 brands: 1 PL, 1 National Brand

Out of Stock = Out of Category

According to P&G, an average retailer loss is 11% of its annual sales

Results & Additional Facts

Results-Kimberly-Clark

- Enlarges the program and manages another 44 retailersOne company explained that they saved $200 M,

another one $75 M

-51% increase in net income

-Less variety easier tracking: Stopped seperate products for boys & girls

-Same principles to its suppliers – 50% reduction over 2 years in storage

-Costco-Out-of-Stock ratio is drastically decreased

-Efficient cost-reduction- Decreased inventory holding cost- Reduced staff in supply chain management

-Shifting from one-month supply to 2-weeks supply

-Consumer-Fewer sizes and less varieties (Unisex Diapers)

-Lower Prices

- Smaller package sizes: Adaptation according to consumer behavior

-More availability on the shelf

Results

Additional Facts Important points on accuracy

Point-of-sale Inventory level Shipment Delivery Customer fill rates

Respect to Confidentiality

Better CommunicationBetter Cooperation

THANK YOU!